⁠Is Africa Poised To Be A Clean Energy Powerhouse? Ep241: Clemens Calice

Looking in as an outsider, it ought to be really exciting because you've got these fantastic wind and solar resources. You've got lots of land area and you've got very low penetration of wind and solar to date. So why is it not attracting more capital? So one of the big issues that need to be overcome and that's really at the heart of what we do is is shortening the period it takes to put infrastructure in place because the most expensive commodity in Africa ultimately everywhere but in particular in Africa it's time. It's the most expensive power you can have is the power you don't have. And so at the moment things take too long for a variety of reasons and the infrastructure around creating or building these plants is still fairly inefficient. The excitement comes in because there's a number of things happening and they're happening so quickly that you don't look at it, you kind of miss it. And then you have these large areas of land that have deserts or dry areas that have fantastic solar conditions or wind conditions. And so you have both the ability to go fine and why it but also you can then think a little bit more about what's the role of North Africa and how can it power really all of Europe pretty much but also the rest of Africa. Hello, I'm Michael Libraik and this is Cleaning Up. Africa makes up 18% of the global population but uses less than 4% of its energy and it only attracts around 1% of global energy investment. It's a stark mismatch and it's headed in the wrong direction. Africa's population is very young. It's set to grow from 1.5 billion people today to 2.5 billion by 2050 and it could reach 4 billion by 2100 accounting for 2 out of every 5 people on the planet. Africans want and deserve the same prosperity shared by richer parts of the world and that must mean investment. My guest today is an expert on the flows of capital into Africa what is working and what isn't. Clemens Caliche is the CEO and founder of Signum Capital, a member of our Cleaning Up Leadership Circle. It's a financial organisation focused almost entirely on Africa with 100 professionals half of them based there. We're going to talk about how Signum is deploying over 1 billion dollars of capital across Africa to speed the energy transition. Why most developed world organisations are failing to allocate the capital to Africa that the opportunity deserves and how that might change in the coming decade. Please welcome Clemens Caliche to Cleaning Up. Clemens, thank you so much for joining us here on Cleaning Up. It's great to be here. Now we're going to start where we always start with the short bio. It needs to be the short because you've done so much. But the short bio and obviously also Signum Capital and what you do. Of course, yes, so my name is Clemens Caliche. I'm the CEO of Signum Capital. I am Austrian. I started my career in banking straight out of university in a somewhat accidental manner, but have been in finance ever since. After working at Wurgenstand in Goldman Sachs, I founded what was then called Lions Head Global Partners with two of my former colleagues. This business changed its name. It's now called Signum Capital and is an investment bank and financial services business that focuses on frontier or growth markets for us that's predominantly Africa, Middle East and certain central Asian countries. OK, now you went pretty fast for some of our audience. Some of our audience are highly financial. They know exactly. They might even know your organization, but they'll know exactly what investment banking and financial services. So you've got a banking function, which is helping to raise money and helping to put money to work, but it's not money that you manage. And you also have an asset management piece. Is that right? Correct. So on one hand, we are intermediaries and service providers to people that are looking for money or seeking to invest money. And we also help them accomplish their strategic goals that could be making acquisitions or divesting certain businesses, the traditional corporate finance activities. And then on the other side, there's an asset management business where we raise money from institutional investors that are based on a certain strategy and trusted money to us. And then we go out and invested on their behalf. And about how much have you got under management in that second strategy? We currently manage around $1.3 billion for across seven funds that all focus on Africa with slightly different strategies. Main focus is renewable energy and energy transition. There's a funded invest in agriculture and natural capital solutions. And then there's a financial institutions. And Avenue will be tried to strengthen local capital markets and channel money into the economies that we work in by investing through banks. We have this disparate audience. And some will go 1.2, 1.3 billion. I mean, that's tiny. And some will be going, gosh, that's huge. And of course, but it is-- that is all in Africa, which is a relatively modest market. So it's quite significant. Yeah, I mean, it is both tiny and it is both huge in some ways because it is tiny in the global context of money being invested. But in an African context, $1 billion plus is a size of our amount. I mean, roughly speaking, for a direct investment into the private sector, which is what we focus on in a year, is around $50 billion these days. So against that backdrop, it's a meaningful number. It's meaningful. And we're going to dive in today mainly into Africa. What percentage of your activities are Africa? I mean, you mentioned that it's emerging-- It's probably 75% to 80% at the moment. OK, so we're going to focus on that. And before we do, can you make it really concrete and give a couple of examples of transactions or businesses that you work with just to make sure-- and what did you do for them to make it really concrete? So as I mentioned, the big focus of what we do is being involved in the renewable energy, energy transition and energy efficiency sectors across the continent. And there's a couple of areas where you've seen tremendous movement over the last few years. One example would be that it's so-called commercial and industrial renewable energy market. So that's essentially solar panels on the rooftop of factories or solar plants that supply specific industrial customers have really taken off. Yeah, there could be mines, but it could be any manufacturing facility. And with the price of solar panels dropping rapidly as we all have seen, plus now more recently, battery price is coming down at an equally rapid scale. You know, it's only have a solution that is very competitive can be delivered in small and in large quantities and in very remote locations. Let me just make sure-- just clarify, because it's so interesting to get into some of the detail. So this would be an industrial company that's doing some manufacturing's got a roof, wants to put solar on it, but doesn't want to use their existing balance sheet. They don't want to use their current funds, or a mine that has lots of space, wants to do solar, probably with some batteries to replace presumably diesel as that. Right. I mean, in general, if you're running a factory, you're not in the business of generating electricity. You're used to getting that delivered by the grid. Yeah, that's not always available in Africa so some people are forced into generating their own power. They would buy diesel generators. But if somebody else can deliver this to them at a cost-effective price, then that's the preferred method. And that's true for almost anybody. So a mine would otherwise have to find someone who delivers at a heavy fuel oil or diesel power generation, or it goes to one of the companies that we finance that delivers a solar solution. So that would be a third party, not the mining company, but a third party that will sign a contract with the miner, a power purchase agreement, and then you help that company to raise the money for the solar. Right. So for example, I mean, we've been working with a company called Crossboundary Energy for the longest time. That started off delivering smaller solutions for smaller manufacturing sites. And has more recently pivoted towards replacing the large scale diesel and heavy fuel oil power generation that is being used to provide electricity to mines. So individually, you're going from hundreds of thousands of dollars of investments to hundreds of millions of dollars of investments to deliver power to these clients. And we are providing the financing or part of the financing that allows these companies to grow. Very good. And I've actually-- I know Crossboundary Energy. I've met Jake Kusak, I believe, is one of the leadership team, if not the leader. I'm not-- Yeah. And he, I mean, he-- Crossboundary does a few things. And he is one of the founders of it. There's a separate team that deals with the-- the Crossboundary Energy part of the business. But yes. But you also-- it's not just renewables. You do some other things around other forms of energy and around infrastructure. Any other examples? You notable examples to give them? Yeah. I mean, a big trend. They're not just here. But also in Africa is to electrify transport. And what's interesting about these markets is that most of the transport there-- well, a lot of the transport is in the form of two-ealers. So small motorbikes, they're very pollutant in general and run on fairly inefficient engines. And that is increasingly being replaced with electric motorbikes. Once it adapted for an African context where the loads tend to be higher, more people sit on the bike and carry around more stuff. And the roads are worse. And that has a number of benefits. It reduces CO2 emissions. But also this entire logistics value chain of moving fuel from the port to countries that are far away. All of that is being bypassed by switching to renewable energy. So there's a multiple benefits. And it's one sector that is sort of rapidly converting from fossil fuels to electricity. And it's very, very exciting. So I was at an event two weeks ago where there was-- how can I put this very nicely to the gentleman, an old school energy professor who said, we were talking about electrification. And he said, you've got to understand. You must understand, in Africa, they're never going to use electric vehicles. And so first of all, the two e-lars are going very fast. But also, I think in Ethiopia, 60% of new cars being bought are electric. I mean, it's an outlier in Africa. But 60% isn't clearly not nothing. No, absolutely. And I think that's really the interesting and exciting thing about this whole renewable energy story. Because unlike here in Europe, where we're trying to fix a problem that we created 100 years ago, in Africa, you're trying to leapfrog bypass a potential problem and make economies, if you will, fit for the future. And we know that the future is going to be moving towards more carbon neutral development. And so you have a lot that needs to be built, a lot of infrastructure that has to be constructed. And you can look at it with a forward-looking perspective and saying, OK, so we know where we end up. How do we construct our infrastructure, our interdependencies so that we're ready for it? The word you use, leapfrog, I have commented quite frequently in the past about how particularly in the climate negotiations, that word, which should be absolutely pivotal for-- particularly for Africa, but also Southeast Asia and even Latin America when I started-- it seemed really clear that the goal should be a leapfrog. It should just be like, it's Germany. When they got telephones, they went straight to mobiles. They just didn't bother with landlines. And getting these countries or helping them, not getting them, because that implies some kind of coercion. Helping them to jump to a better system and to the future system is a leapfrog. And yet the debate is very often around, so we must stop this or prevent that or reduce the other, which has no resonance whatsoever, sort of locally. No, of course. I mean, so Africans, that's a generalization because they're 54 countries and they're all very different. They are interested in development at home and how they can move up the development curve, as it were. The problems that we have in Europe are of no concern to them. Africa is not a particularly large contributor. Actually, it's a very small contributor to global CO2 emissions. So all they care about is they need power. They want to move around. These are fundamental requirements to build an economy. And they want to have this in an efficient manner. And so we talk a lot about transmission in Europe and that's born out of a system where you have large power stations on one end and large consumers on the other end. That model for Africa is not suitable, because you have much more decentralized electricity generation. Wherever they're sun, you can put up a power plan. And so you're building your grids from start in a very, very different manner. Let's take just a second to do the sort of, I don't want to call it the geography lesson of Africa. But there are a lot of people who would have some vision, some understanding of Africa, obviously. But it probably doesn't, for many people, for myself as well. It doesn't kind of spam a full range of countries. It's diverse. It's very diverse. You've got everything from the sort of President Trump view of Somalia. He's just been very extremely rude about Somalia. But then you've got all the way through to pictures of skyscrapers being built in Accra or in obviously, we all know South Africa. But how do you get your arms around this thing? You say, OK, we do Africa. But it's kind of big and diverse, right? Yeah, I mean, it is certainly. And that's why companies like Signal Capital exist because we can construct the bridges between the outset, well, then Africa and within Africa. Because as a continent, it has a GDP of just under $3 trillion, which is sizeable, it's size of Italy, if you will. But then it's spread out over 54 countries. And the distance is a geographic space is massive. You have just to put this in context. The distance between Nairobi and Dacas or East to West Africa from Kenya to Senegal is the same as from Moscow to Vladivostok. Yeah, everybody knows that. That's a seven-day train journey. A famously long distance. And this is it. You're talking East to West. And in the same mouth is even longer, of course. I sometimes think that Mercato has got a lot to answer for because the Mercato projection shows Europe is this kind of big thing. And it's obviously always in the middle of the map. And then there's Africa, which is sort of blob underneath it. But if you get rid of the Mercato projection, if you look at it on a globe, you find that Western Europe is about 5%, literally 120th of the size of Africa. Yeah, I mean, the Democratic Republic of Congo is about the size of West and Europe. But it's also-- I mean, they realize you have countries like Kenya, Tanzania, which on the map look relatively small. But I mean, Tanzania is the size of France, Germany, and Benelux. It's quite sizable. But then you have a lot of countries, especially in West Africa, Togo, Benin, Guinea-Bissau, the Gambia. They're very, very small countries. So you have size and fragmentation at the same time. And somehow all of that needs to be tied together. And that's the big challenge that lies ahead. But also the big opportunity, I guess. So we did an episode in West Africa and Oscar our producer and I, we got stuck overnight. And we missed a plane in Casablanca. We ended up going through-- I think it's the Gambia. I'll have to check that. But it's literally a little tiny strip of land alongside one river. And then you've got these other places, like Niger and they're absolutely colossal. But also in a very different states of development. I mean, if you include North Africa, then you've got countries like Morocco with quite considerable amount of industry Egypt. I've also just been to Egypt. Very considerable manufacturing industries. But you've also got much poorer countries and countries that are in conflict zones. So do you have a sort of list of countries that you deal with and the whole bunch that you say are too hard or are you open to pretty much anything? So nothing is really too hard for us. We've invested in 35 of the 54 countries and there's some smaller islands where we haven't gone to. And in a few places where we can't invest. Very few like Somalia, where there's no government, and no rule of law. But it's interesting. In the past, Africa used to be sort of a tale of two ends. You had the North, which was reasonably well understood from a European perspective. And you had South Africa, which was fairly developed. Country and part of the bricks compared itself more to China and Brazil than to the rest of Africa. But it's the middle where you have a lot of people. Nigeria has 220 million people. Ethiopia has 170 million people. This is where all the growth is coming. And so, over the last 10, 15 years, I think the focus has shifted more towards looking at Africa. Not just as there are two ends and a lot of space in the middle, but as a big continent with lots of opportunities coming from different places. And then you've got these two book ends of what investment in Africa looks like or should look like. One is it's this vast continent full of opportunities around, effectively, mostly around mineral extraction. So it's about a resource and extractive. You could say a very exploitative view of investing in Africa. And then you've got the other end. You've got the various UN agencies, because there's a whole bunch operating in Africa that would say it's all about-- it's a development model of trying to bring people up to the human development index. So which is quite a sort of-- I'm trying to do this without using the word post-colonial. But it's quite a sort of, in some ways, a patronizing view as well. And that's very closely linked to the climate view, which says, oh, we must make sure that they do geothermal in Kenya and wind in Kenya, but not gas and not oil. We're not going to finance pipelines. We're not going to finance gas exploration. We're not going to finance a whole bunch of things that, in a sense, the developed world-- developed world preference view. Yeah, obviously, we've just come out of a relatively long period that was driven by a strong ideology around certain themes. And I'm pretty hopeful. And we see some of the signs that we are moving towards a more pragmatic approach to looking at how we engage as Europeans with the African continent and growth markets in general. So there was a period where everybody said, you can't touch anything that involves hydrocarbons. That's a bit of a self-defeating strategy, because Africa has a lot of gas, which, by the way, Europe wants or needs. But also, we were approaching the whole debate from the question, so how can we create resilient climate resilience? Because weather patterns are changing and so on. But we can't forget that resilience and protecting against climate shocks only really make sense if you also create economic resilience. And so these countries need to continue to grow. And for that, hydrocarbons are, in some instances, an necessity. Well, so you'll know that I like the word pragmatic. I've tried to kind of-- I've tried to own the word pragmatics. I've got eco-pragmat capital, which is one of our leadership circle members, also something that I co-run, but also pragmatage, charging business, and the pragmatic climate research. I'm a big fan of pragmatism. And for me, though, pragmatism is, first of all, it is dealing with climate change, because climate change is real, but it is doing it in a not an absolutist way. So a bit of fossil, if it enables a lot of clean-- so it's not fossil for fossils sake, which I think certainly look at the Trump administration, and you look at some of the voices actually in Europe as well. It's like, OK, now we forget climate, and we just go and do a whole bunch of fossil, because that's where the money is, and that's what African Africans need. I don't like approaching things from to found the bookends of a spectrum, because I think it just creates a lot of unintended consequences, or it leaves a lot of opportunities by the wayside that are ultimately benefiting the ultimate goal. And also, I mean, as you know, fossil is not fossil, there's coal, which is a big part of what South Africa uses. But for the rest of the continent, natural gas is probably the more promising feedstock for a certain type of power generation. And as you construct a electricity system, you know, that runs across lots of countries that has to bring together a lot of countries. Yeah, that-- we've seen a lot of progress in Africa. We have these power pools that develop, that create really interesting opportunities as moving power between countries and between users. Yeah, there you can think about combining-- a starting over the renewable generation basis, but then supporting it with a bit of fossil to bring stability into the system. And I think that's necessary. So we had a very good episode on that, with Anna Hajdukka from Africa Greenco, who's been working incredibly hard on the Southern Africa power pool, actually, you know, pushing, promoting it and bringing skills into Africa. And so being one of the leading players that wants to use that pool, but actually doing some of the hard yards of helping to get it built. And we'll put a link in the show notes to the episode. We also had an episode with Alan Ebbel-Bissé, who's the head of Africa. It's a thing called Africa 50. It's an infrastructure multilateral of African countries. And he was certainly bemoaning the idea that you just couldn't do any oil and gas. And that Europe was being-- I don't think he used the word hypocritical, because Europe is using gas. And in fact, since the Russian invasion of Ukraine, Europe is actually building gas import infrastructure, but not funding Africa to build gas export infrastructure. It seems the height of hypocrisy, to be honest. Yeah, I mean, I think that's absolutely spot on. I mean, you can't sort of preach one thing and do something else. But also, you have to recognize where you're operating. And you mentioned Africa, Greenco, we've been working with Anna from the very first day. And she's a great example of seeing a business being created, but then also evolving against the backdrop that is incredibly dynamic. I mean, as Africa, as many people probably have heard, had had a big issue with power outages, aging infrastructure. And that created this massive boom of new solutions to provide electricity. And as a African government at some point, you basically gave the private sector free rein. And said, you figure it out. And that's been a real drive of innovation and opportunity. And a lot of people have invested. And it's been brought this speaking a success story. So I've been doing-- well, not this, not this specific hosting, cleaning up, but I've been around this area for long enough to have seen the full pendulum swing from around 2007, 2008, when I was trying to say, actually, solar and wind get really cheap. And Africa and specifically South Africa should do a whole load of it. And being told that that was a post-colonialist trying to impose a Western solution on South Africa, which clearly had every right and should just build coal. And the World Bank pushed-- there was the two big coal plants, Medoupin, Cousilla, which were catastrophic performance, catastrophic black holes for money, and bankrupted S-com and led to these rolling power cuts and so on. And then the pendulum go all the other way of saying, well, all you are allowed to do is wind and solar. But I suppose we're hoping, both you and I, if I interpret the last few minutes of our conversation, that the pendulum sort of stops in the middle, although pendulum's just generally kind of don't. Yeah, I mean, it's definitely coming back the other way. In many ways, driven by more and more success stories around renewable energy, but also an appreciation of renewable energy is just part of a larger system and there needs to be integrated. So hopefully its thesis, antithesis, and then synthesis, and the pendulum does stop. But let me ask, how do you stop? For instance, if you say, OK, there's going to be gas around being extracted in multiple countries in Africa. How do you ensure that what's not built-- after this very carefully, without it being, a European would prefer if Africa didn't build and trying to impose my values. But it would be a mistake to build big CCGT inflexible gas-fired power stations in Africa, because so much at the time they would have access to cheap wind and cheap solar, which means that plant will not run and is a waste of capital. So if you're going to build gas, they should be building flexible gas, peaking gas, that isn't enabler for lots of wind and solar, and integrates lots of batteries, because they will still be cheaper than gas. So Africa should be doing as little gas as possible domestically and exporting as much as possible. Is that what you see happening, or our country saying, great, we're going to get gas, and we're going to have reliable power, big CCGT plant, brackets, probably Chinese technology? And I think that's-- this is one of an example way. If you talk about Africa, you're kind of generalizing too much. So you have East Africa, which has very little gas-fired power generation, and there's no rush towards building large CCGT, even though they're very large gas reserves of the cost of Mozambique tens of years. In West Africa, you have gas infrastructure network that's a little bit more developed, but also a lot of heavy fuel oil power generation, which you can repower by replacing diesel or HFO. So heavy fuel oil with gas, and that's what's happening. And then you have in the South Africa, which is a very large fleet of base load, coal, power-fired generation. And they kind of need a little bit of everything to move away from just being dependent on coal. But what's interesting is the power market, as you know, always has an element of government intervention, because the national utility plays an important role in buying power and moving it around. And so government policy drives in some ways in which direction the market goes. But the majority of the new generation capacity is privately funded. And so private investors, they ask the same question that you ask. And so there is a little bit of a checks and balance system in place where you're currently not seeing at least a rush into something that then maybe come obsolete in five years time or only serves a certain part of the country. So I think it kind of works. It still could be much better, but because it is capital that's not necessarily government-directed, you have a slightly more sensible approach to things. Looking in as an outsider, it ought to be really exciting, because you've got these fantastic wind and solar resources. They've got lots of land area, because these technology, wind and solar, are very land hungry, right? You've got lots of land area. And you've got very low penetration of wind and solar to date. So all this stuff about, oh, we've got curtail, mounds, and so on, you don't have, although, I suppose, if you don't really have a sophisticated or a fully built out grid, then even relatively low penetration can cause problems. But it feels to me like, I don't want to say, there should be a bananza, but it should be a very attractive market. So one of the big issues that need to be overcome and that's really at the heart of what we do is shortening the period it takes to put infrastructure in place. Because the most expensive commodity in Africa, ultimately, everywhere, but in particular, Africa is time. And so at the moment, things take too long for a variety of reasons. And the infrastructure around creating or building these plants is still fairly inefficient. So there's massive gains to be had. The excitement comes in because there's a number of things happening and they're happening so quickly that if you don't look at it, you kind of miss it, that have a fundamental, or that will fundamentally change how these markets work. So on one hand, the ability to put solar plants anywhere, even in remote areas and not having to worry about moving power long distances. On the other hand, you now can move power very large, very long distances. There's always age, so high voltage direct current, VDC technology that's being built. And people talk about the world at some point having a ring of transmission infrastructure that connects everything. And then you have these large areas of land that deserts or dry areas that have fantastic solar conditions or wind conditions. And so you have both the ability to go fine and wide, but also you can then think a little bit more about, what's the role of North Africa and how can it power really, all of Europe pretty much, but also the rest of Africa. On that one, I'm still smarting because I am an investor in X-Links, which was Morocco to the UK, which our government tragically decided not to back. My own view is it'll happen because the logic is so compelling. But it's not the only link across the Mediterranean. What is the role of risk slash risk perception in slowing down what ought to be a very rapidly growing investment flow? Yeah, I mean, it's a very interesting question because the first instinct of everybody that is in the finance world that thinks about putting money to work in Africa is that it's very risky. Yeah, and it is risky, but lots of places are risky. And there's a lot of evidence actually that the risk is generally overstated that the perception of risk is not congruent with reality. And a recent data that has been published on default rates, especially as it rates to infrastructure, really substantiates this. But people have a point in that there are other non-financial barriers that make investing in these markets your risk from an investor's perspective. It takes a lot of time to figure out the different legal regimes when you have 54 countries. You do have macro shocks that have an impact on governments, governments change, they're military coups and so on, getting money out again. These are all things that keep people on the sidelines. And it's some degree our job to both explain to them that it's managed about also fine structures that work around it or work alongside these issues. And so risk perception is an important part of it, but it's also creating the access that money can flow more freely. If we kind of unpeel what does risk mean, there's the sovereign risk, the risk of the country, there's the foreign exchange risk. You know, country could be actually doing fine, but its currency devaluing and therefore you may get paid for your electricity and a currency that becomes, you know, that can't cover the cost of the equipment and the capital. And there's also the risk of the off-taker of the company that binds the electricity. So where is the misperception? Where is the problem? What are people worried about? Are they worried about sovereign and they worried about currency? Even what's stopping, what would you need to do to unblock this? I think in some ways everything is kind of mixed together and in a maybe slightly too simplistic way called as declared as risky. Because I mean, if you think about power generation, in particular power plant, may stop running, but it's not going to disappear. And as a piece of infrastructure, it maintains its value. And so I think this part of the risk is probably overstated or we don't have the mechanism for the instruments, financial instruments to deal with that risk because we take a very traditional approach to financing infrastructure that's driven by European models. And that's a point made by Lucy Hines, Actis on this show and also Daniel Calderon, Alkazar Energy, that fundamentally, if you're talking about countries that need a lot of electricity and they have a high domestic electricity price, probably because it's set by fuel oil or some imported fuel, then they need that asset. So the asset is not going to disappear, as you say. It's going to, and they're actually going to look after it, make sure it does continue to produce and that requires being paid. But the perception of risk, I guess I'm fascinated by the question of how asset managers, not yourselves, but big, big asset managers, allocate so little to this part of the world because of the perception of risk. And when you really talk to experts, you find that the perception is just simply either wrong or manageable or much more nuanced. I think this is the area where people talk a lot about risk, but there are many other issues why as an asset manager in Europe, I guess it's the same for the US, you're hesitant to deploy a capital. Think about it this way. If you manage a trillion euros, which is the size of many of these asset managers, and then you look at investment opportunities just by European or global standards are small, and distributed across 54 countries. How much time are you going to devote to put $100 million to work, which will take you a long time in a place that you don't have a base, you don't understand the legal system, there's compliance and everything you need to sort out. So even if you can convince someone that the returns are fabulous, they still may be hesitant because they can't deploy enough capital. The vehicle's to move larger amounts of money into these markets don't exist. This is where we come in. We're trying to figure out ways to take what's a dispersed set of opportunities individually quite small, bundle them together, do some de-risking along the way, and then allow larger investment flows to go through them. But there's a huge chicken and egg problem, because as long as there's only a few billion of which you're managing, I think I can't remember if it was 1.201.3. 1.3. So you're managing 1.3. But until there are tens and tens of billions or hundreds of billions, that whole ecosystem of lawyers and resource consultants and insurance companies and so on, there's a whole ecosystem that needs to be drawn in, and as long as there's just a drip of resources, it's going to be slow. Yeah, I mean, that's certainly true, but that drip, drip, drip has to become the raging river, if you will. And it's people like us and people like actors, and many others that try to create the critical mass here. Cleaning up is supported by its leadership circle. The members are actors, Al-Qaça Energy, Arab, Signum Capital, Davidson Kempner, Equipragma Capital, EDP, your Electric, the Gilaardini Foundation, KKR, National Grid, Octopus Energy, Quadratro Climate Foundation, SDCL, and Vatzilla. For more information on the leadership circle, please visit cleaningup.live. If you're enjoying cleaning up, please hit like, leave a comment, and also recommend it to friends, family, colleagues, and absolutely everyone. To browse our archive of over 200 past episodes and subscribe to our free newsletter, visit cleaningup.live. That's cleaningup.live. What proportion roughly of the either banking work, the advisory work, or the investing? What proportion of it involves multilateral of one sort or another? So, World Bank, African Development Bank, or I guess it would be. EBSD from Europe, or the equivalent for Asia, or the BRICS Bank, and so on. So, that's still especially as you're interested in infrastructure, a the largest pool of capital. But what's interesting, five years ago, the answer would have been, it's basically 80% multilateral, so the World Bank, the African Development Bank, the European Development Banks, and then a little bit of institutional capital. That is now changing because the two have come together to work together in a way that creates interesting pathways for institutional, a private sector money to co-invest with those multilaterals that provide a certain degree of stability. And so, we've seen dramatic rise in activity. I mean, us alone, over the last 12 months, we've raised north of a billion dollars for companies active in Africa, which is a big number for our markets. And half of that money is institutional money. And so, there are institutions, there's an insurance market that is starting to take note of things that are going on in the ground. And interestingly, and importantly, you also see some of the local capital providers, which would be the Pan-African Banks. And some of the pension funds and insurance companies that manage African money, you're taking a keener interest in what's happening with infrastructure that really should be owned by them and not by European investors. And there was always quite a big chunk of capital in South Africa. South Africa always had savings and it had banking institutions and so on. Is that now generalizing out from South Africa? Yes, and that's another thing that's changed, I would say, over the last five years. And South Africa always saw itself as being South Africa. And then there was the rest of Africa with which they had very little in common. And that's changed because they too have converged. But also, the South African banks have become larger and they are overexposed to South Africa. And so, they're looking for opportunities across the continent. And you see them now in most deals very actively. And in reasonably sizable tickets as participants. What I suppose what's looking for is capital formation where there would be Nigerian banks that could do a big slug of what's happening in Nigeria or Ghanaian banks in Ghana and of course there are a whole bunch in North Africa as well already. Is that kind of, are you seeing that or insurance companies, not just banks? Well, you have, I mean, you have a local capital where it's banks or pension funds and insurance companies that invest within their borders. And they are also getting a little bit more accustomed to investing in infrastructure which in the past they wouldn't have done so much. But what really is needed is money that can go pan-African because a lot of the companies that create these solutions, they want to be diversified as the opportunities in multiple countries. And so, that's another bridge that has to be built. They also talk about an African free trade zone that's still some years away. You have regulation that restricts local banks from investing outside. And the pension fund regulation is still very tight. And it's important to remember the metric that you gave which is in aggregate, this is an economy the size of Italy and it's divided into 54 countries. So, you've got what you really can't have a bank that can be really, truly, globally competitive if all it does is one Italian product. Exactly. It's just a world. Individual markets are too small and yeah. Looking at another way, the deals that you do, so they still do involve multilaterals. It's a falling number. It would have been 18. I think you said it was sort of 50%. But what about the person who uses the energy if it's an energy deal? Is that generally, is that a Western company? Is that a mining company where, you know, to what extent is this all underwritten by effectively demand from the developed world? Or is it endogenous African demand? Well, first of all, I mean, keep in mind, you're talking about 1.5 billion people, soon 2 billion people. Yeah, and they consume and they have needs. And so, domestic demand is by necessity going up. Yeah, there's no way around it. But they pay in local currency. So, there's some risk issues around that. Yeah, that's my question. But I mean, the power sector is sort of largely dollarized. But yes, it's correct that that is a local currency market. But on the back of it, you have a demand pull from outside, you have resources locally. And so, there's increasing focus on having manufacturing capacity on the continent that can serve far-away markets. I mean, the classic example would be fertilizers, where at the moment, your potash, your mind goes off and then maybe comes back through a European and American company. Now, with your favorite topic, hydrogen, debate, and green nitrogen and so on, people are starting to think about manufacturing fertilizers within Africa. And so, you have a little bit of everything pushing the market along. I wasn't sure whether we were going to get onto green hydrogen, whether we should bother with it. Because my view, almost none of those projects will happen. Because they're all, first of all, if it was for local African demand for fertilizer, green ammonia, green fertilizers, just simply going to be twice the cost of anything that made out of fossil. And so, it's not for the local market. It can't work for the local market. It could only ever be exported to Europe. But the carbon pricing Europe is not high enough to justify even that. So, I don't think then that's going to be built. I actually look at those. I've got to be honest. I look at, you know, Namibia and they've got these kind of signs by the side of the road saying, "Green hydrogen is our future," and they've got, and so on. And it's just a, that's just a smoking crater of a strategy. I mean, this would be an entire different podcast, I guess. And you've had many on those around that topic. I mean, there's some people that do disagree with you. I think that broadly speaking, people have come to realize that as the panacea for stopping climate change, green hydrogen is not going to be the solution. But, I mean, you have certain pockets, and I think Namibia is where this debate can be had where you might find solutions that work. But I was taking more the example of further value addition to natural resources. That is being pushed very heavily. Of the billion that you said that you'd raised, you know, relatively recently, for clients, those clients, what sort of organizations are they? Are they big, multilateral mining companies? You talked about some of the kind of manufacturers that are putting solar on their roofs and so on. What sort of companies are, what's the mix? Yeah, you have a mix of people that provide electricity, and then you'd have to ask where does the electricity go? Yeah, I think the electricity goes. There's a mix of, there's a lot of focus on mining. There's a big consumers of power. And at the moment, this is still a very extractive model. So you get your copper and you ship it out, and then it gets treated offshore. But I think that you will see more onshore treatment of value addition. And then you have a lot of local industry. Because in the end, I mean, if you look at another number, the average age in Africa is 19. I think there's some staggering numbers of how many young people enter working age every year. They need to be employed in large numbers. Not everybody can be an influencer or be engaged in the gig economy. So what's the Nigerian equivalent of Bollywood or Hollywood? Yeah, not Hollywood, as it's called. Yeah, not Hollywood. So you need large-scale manufacturing and really capitalise on the human labour pool that you can tap into. And that ultimately needs cheap electricity. And this is where these two worlds come together. Taking that sort of flow of money, cutting it a different way, how much of it is coming from Europe versus the Americas versus Asia of the flows that I suppose the ones you handle, but also the flows that you see going into the economies. I mean, how is Europe a shorthand? How is Europe doing? I mean, it's interesting because obviously this is a very dynamic world. And there's a very simplistic picture you can paint and says, OK, the US, with its current administration, is very clearly focused on two objectives. One is countering China and the other one is getting access to resources. Yeah, and that's increasingly stayed driven, if you will, with the way the government is investing in the private sector. And then you have the Asian economies that are still operating and that also applies to the Middle East, largely on a government-to-government basis. And then you have the private sector, which is really, as it relates, to foreign companies largely dominated by European players. And I think this is where that's frustrating to me. The debate in Europe about Africa is always defensive. We have to keep people from all coming to Europe. But there's a huge opportunity. Europe already has a base. And if you build on it, it could be a growth engine for many years to come. And so I think private sector, Europe has a huge role to play, basically. Yeah, it's funny, because if you go through the drug-europort or the background to the drug-europort, you look at all the problems that Europe has got in terms of low-growth, demographic problems, extremely high environmental rules that make it hard to manufacture. And then you kind of look just head south, just look a bit south. And you get this enormous opportunities, huge numbers of young people, a dynamism in some ways, an entrepreneurship unleash. Because when you do see things happen in Africa, they happen very fast. And they can be very impressive, as you look at telecoms or the programming community in Nairobi, for sure. Yeah, we really need a shift in narrative, because all this official development assistance, a topic where Europe spends money to develop for development purposes in foreign countries. People are saying we shouldn't do this because we have all these problems at home. Yeah, which is true. We have Ukraine, we have the other way, and we have social issues that need to be addressed. But if you think about an investment in Africa, just as we're giving away money for the greater good, I think you're missing an important aspect. Yeah, by developing Africa in conjunction with a European or aligned with a European model, we're also safeguarding our own future because where is growth going to come from? And what is Europe's role ultimately going to be 20, 30 years from now? I couldn't agree more on a previous episode, actually, with James Cameron, who also chairs our editorial council. I was very annoyed by the COP in Baku, where the European essentially environment and climate ministers, because there were relatively few heads of state or finance ministers, they went off there and they signed a document saying that Europe would be investing $300 billion per year in countries which, frankly, are going to be our global competitors, our economic competitors. Without this sort of vision of saying, "Well, actually, what are we trying to achieve?" You can see it just through a climate lens, and it just felt very tin-aired to me. It felt very inappropriate. Instead of understanding that there's a whole load of goals for Europe that really ought to solve core problems of Europe, but that also involves helping Africa to develop in a way that is, how can I put it, not just seeing through the climate lens or this defensive lens? Let's just stop them coming to Europe because that's the number one objective. Instead, this vision that you laid out is very compelling. Yeah, we have this schizophrenia as an Austrian, I can see that we've never had any colonies, but on one hand, we don't want to be seen to be too forceful as Europeans because of our colonial past, and that limits our ability to create this win-win narrative. But I think that these can be reconciled. We can contribute to the development, and at the same time explain to citizens in Europe why this makes sense for them ultimately. There's just not enough effort people to distract it, and politicians are in general too much on the back foot, I think. I was always very aware, I worked on sustainable energy for all, I worked very closely with Bunky Moon back then, and I was very, very aware that as a Brit, I couldn't rock up anywhere in the global South and say, "Here's what I think you should do." That's completely inappropriate. But it is a question of saying, "What sort of world do we all want to live in, and how do we then work together to build it, and to make it cleaner and more resilient, but also we've got to find huge numbers of jobs in both of our regions, frankly." The question should be, "What can we do for you, what do you want us to do?" Really, more importantly. And then look at it through the lens of, does it make sense for us? To close then, if we see that as the goal, we've now solved the geopolitical problem, but you're running an organization, Sigmund Capital, what do you do in the next, let's call it three to five years? Is that the direction of travel that you see, can you influence it, and how are you going to build your institution with that in mind, or if it's not going to happen, then how else are you going to continue to develop? For sure. I mean, our trajectory has to be, we need to grow. There's a huge opportunity set with relatively small organization, and growth means that we need to manage more money, and then we need to be able to support more clients as financial advisors to raise money. And we do this by creating a bridge between being, we're regulated in the UK and in the Netherlands, and also to places the weeks. We operate through international standards, but we have a local presence, we understand local markets, so this bridge that we create, that's one important aspect, which is know what's going on, we have 115 investments all over Africa. At some point, you can pick up the phone and get some information everywhere, but also we need to create these vehicles that deal with some of the problems that are causing people to stay on the sidelines. We have to make it much easier for money to flow. And this could be through funds or through investment companies. And so we want to grow this, and as institutional capital takes a closer look again at emerging markets, because as you know, there's been a big outflow of funds in the past 10 years. We need, we want to be there with the solutions that allow that capital to flow somewhat seamlessly. So if you look at the growth rate of Africa over the last decade, which is something 34%, that means that the African economy currently decides bitterly, as we now know, thank you, is going to be 50% bigger in a decade. And if our vision comes true, then maybe it's more than that, maybe it may be. It should be twice as big. It should be growing at seven, and it should be twice as big. Will signum capital be 50 to 100% bigger, or will it be, will it be able to, will you be able to outgrow the rate of growth of the African economy? Definitely. I mean, we've been growing at 20, 25% a year over the last few years. And as a financial institution, you should always grow faster than the underlying economic growth. So for us, this is a, I mean, we definitely need to double the size of our business, and it can't be 10 years. So we will outpace this growth. If the fundamental stay correct, and if we do a good job, I'm convinced of that. For a good. Well, I look forward to checking in with you. Maybe, we're not going to wait a decade, and I'll check in with you, and I'm sure you'll be able to maintain your growth rates. And it's a very good job. Thank you. Well, thanks for this. It's a very, very good conversation. So that was Clemens Cali-J, CEO of Signum Capital. A member of the cleaning up leadership circle. As always, we'll put links in the show notes to resources mentioned in our conversation. So that's my conversation with Lucy Heitz of Actis episode 196, Daniel Cali-Ron of Alcasa Energy, episode 216, and Anna Hajduker, founder of Africa Greenco episode 120. With that, it remains for me to thank our producer, Oscar Boyd, video editor Jamie Oliver, the team behind cleaning up the leadership circle, who make all of this possible, and you the audience for spending some time with us here today. Please join me at this time next week for another episode of Cleening Up. Cleening Up is supported by its leadership circle. The members are Actis, Alcasa Energy, Arab, Signum Capital, Davidson Kempner, Equipragma Capital, EDP, Urelectric, the Jillardini Foundation, KKR, National Grid, Octopus Energy, Quadratriq Climate Foundation, SDCL, and Vatzilla. For more information on the leadership circle, please visit CleeningUp.live. If you're enjoying Cleening Up, please hit like, leave a comment, and also recommend it to friends, family, colleagues, and absolutely everyone. To browse our archive of over 200 past episodes and subscribe to our free newsletter, visit CleeningUp.live. That's CleeningUp.live. [BLANK_AUDIO]